The world economy is facing “one of the worst energy crises in history” that could send oil prices soaring above $US150 a barrel, a leading analyst has warned, as the New South Wales premier announced the state was working to avoid fuel shortages at major hospitals.
Amid growing community concern that the country would run out of fuel because of the escalating Middle East conflict, the Albanese government on Thursday announced a plan to inject millions of litres of additional petrol into supply chains.
The plan would temporarily relax standards to allow higher sulphur levels in fuel. The move was designed to inject an extra 100m litres a month into the system for 60 days.
Chris Bowen, the climate change and energy minister, said the distributor Ampol had agreed to prioritise this petrol supply to towns outside major cities, particularly in Queensland, where shortages have been most acute.
“While Australian fuel consumption has not changed, this will help relieve pressure on distribution chains disrupted by elevated demand,” Bowen said.
The petrol with higher sulphur levels would normally be exported out of Australia to be blended.
The NSW premier, Chris Minns, said a meeting of energy, transport, police and emergency service departments had been convened “to look at emergency supplies and critical services in the weeks and months ahead”.
Sign up for the Breaking News Australia email“We recognise that some of our big hospitals, as well as emergency services, need access to diesel and other fuel sources,” Minns said on Thursday.
“The public would appreciate that they need to take priority in the event of supply shortages in the months ahead.”
Asked if he was concerned that there would be a fuel shortage that impacted hospitals, Minns said: “We have to be prepared for every outcome.”
“In the most critical of circumstances, we’ve got emergency powers that we can enact to ensure that hospitals run. We don’t anticipate that’s what would be required, but the latest information and intelligence are important in terms of sharing, particularly diesel for emergency service vehicles.”
Minns said there was “no need for panic buying”, which he identified as one of the causes of current shortages.
“I would just say to the people of NSW, of course, you need to fill up, but just take what’s required. You don’t want to take it from a family member or a member of your community, particularly if you live in regional NSW.”
Motorists were already seeing fuel price increases of as much as 70c a litre for diesel since the start of the war on 28 February, as fears of climbing prices and even shortages triggered a rush on regional service stations that left some empty.
The dire warnings and emergency planning come as Brent crude, the international benchmark, jumped above $US100 a barrel after Oman evacuated all vessels from its key oil export terminal after an attack on two tankers in Iraqi waters.
Economists have warned that surging energy costs will unleash a wave of inflationary pressures that will hit consumers and force central banks to respond with higher interest rates.
Amid warnings inflation could push towards 5% by the middle of the year, ANZ became the last of the four major banks to predict the Reserve Bank would now deliver back-to-back rate hikes, starting at its next meeting on Tuesday.
The effective closure of the strait of Hormuz has choked off about 20% of the global oil trade, or about twice as much as the first Gulf war at the start of the 1990s and nearly three times the disruption triggered by the 1970s Arab oil embargo.
As Iran escalated its attacks on infrastructure and transport networks, Vivek Dhar, CBA’s head of commodities, warned prices were likely to climb substantially further from here.
Dhar, in a note to clients, said the current shock was “unprecedented”, both in terms of the hit to oil supplies and the lack of spare capacity worldwide available as a buffer.
He warned that energy market players were underestimating the damage from a conflict that was more likely to last months, rather than weeks.
“If the conflict is not resolved and the strait remains closed, oil and refined product prices are at significant risk of rising to levels not seen in history,” he said.
“For context, the Arab oil embargo saw oil prices nearly quadruple – and that was when there was adequate spare capacity to cover the net shortfall.”
Daniel Hynes, a senior commodity analyst at ANZ, agreed that it was time to recognise that the damage from the Iran war was now “structural” rather than a short-term geopolitical event.
“Our previous analysis framed Middle East tensions largely as an event-driven risk, where oil prices responded to fear rather than realised supply losses. That distinction no longer holds,” Hynes wrote in a research note.
He predicted the Brent crude global benchmark price would be at $US100 a barrel by the middle of the year, as suppliers shuttered wells to protect reservoirs and workers.
